Convertible bonds, which offer a risk profile between bonds and stocks, have also benefited from greater investor interest. U.S. exchange-traded funds tracking this type of debt added more than $300 million in May, and another $427 million in June -- the biggest monthly haul in six months, data compiled by Bloomberg show.
“Convertibles are getting the best of all worlds because they have both bond- and equity-like aspects: They are a bond and they are convertible into stocks,” Loeys said by phone. “They gain when stocks go up and they gain when bonds rally, as both asset classes have in the last three months.”
In Europe, where banks have spent the past decade shoring up balance sheets and deleveraging following the 2008 financial crisis, so-called CoCos -- or bonds issued by the lenders that are convertible into stock -- have become an appealing bet. They’ve returned more than 6% annually during the five years through June 30, even after accounting for a 9.4% annualized loss in the first half of 2020, according to Daniel Tenengauzer, head of markets strategy at Bank of New York Mellon Corp. CoCos returned double the region’s government bonds over the same period.
Still, some investors aren’t ready to write off 60/40 just yet. Jack McIntyre, who helps oversee more than $60 billion at Brandywine Global Investment Management in Philadelphia, says some of the criticism about this strategy may be unfair.
“No matter what kind of portfolio you have, you need a defensive allocation,” he said. “That 40% serves a role.”
--With assistance from Sam Potter.
This article was provided by Bloomberg News.